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Euro under pressure

Euro under pressure

Heavily indebted countries face more “painful” austerity measures to get their economies back on an even keel, warned International Monetary Fund (IMF) chief Christine Lagarde. According to her, the eurozone “remains the greatest risk to the global economy today” but action to avert huge fiscal tightening scheduled for next year in the US also “is vital for the world”. Addressing the challenges in the eurozone, is the current focus with growing concerns about the path of economic and budget reforms in Italy and France, two of Europe’s biggest economies.

The markets mood confidence declined further after a weak release of economic data. German business sentiment dropped for a fifth straight month in September, raising fears of recession, as companies struggled with a bleaker economic outlook and the European Central Bank’s bond buying plan failed to create much boardroom cheer. German Chancellor Angela Merkel will meet separately with the heads of the IMF and European Central Bank this week amid debate over the next steps for addressing the euro zone’s sovereign debt crisis.

On the FX markets, the euro continues to soften with EUR/USD under pressure after the Ifo release trading a low yesterday of $1.2889 while GBP/EUR is testing the €1.26 level. The markets are likely to focus on this afternoon’s US consumer confidence release where a positive figure could see the US dollar gain further momentum.

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